Bank raided in ongoing fraud investigation

By Chris Graeme

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FOR THE second time in 12 months Portugal’s third largest bank has become the target of a major tax evasion and money laundering operation.

Banco Espírito Santo (BES), one of the oldest and most respected financial institutions still in private hands, had its Spanish offices raided last week by tax officials and agents from the country’s Guardia Civil, national guard.

Operation Sueter took place on Thursday at the bank’s headquarters in Madrid, as well as branch offices in Barcelona. Spanish police stormed the buildings, seizing computers and examining accounts of suspected clients.

Operation Sueter, which continued all day, resulted in the freezing of accounts worth a total of 1.5 billion euros.

The Spanish Ministério Público, the public ministry, said in a statement that clients were suspected of money laundering and tax evasion.

The bank was sparing in details in its official statement on Friday, in which it said: “These investigations are the result of a decision by the Juzgado Central de Instrucción, the central tribunal court in Madrid, against the entity’s clients.”

According to an unofficial, unnamed source at BES, the warrant for the search was made by judge Baltazar Garzón of the Spanish Audiência Nacional – the highest court in the land.

Garzón is famous for his cases against the Basque separatist terrorist organisation ETA and its political satellites.

According to the Association of Portuguese Banks, the investigation is not looking at the BES institution itself, but at some of its clients.

The same source told the Lisbon daily newspaper, Diário de Notícias, that one of the clients being investigated had already closed his account at the Portuguese bank and that the investigations intended to discover what, if any, knowledge the bank had about the origin of the capital and if the bank had helped create the structures that had allowed the money laundering.  

Authorities are also investigating a trust company linked to a BES affiliate in Madeira, which was allegedly set up and used to avoid paying taxes.

Despite record profits and a multi-million euro face-lift earlier in 2006, BES has repeatedly been the target of investigations into financial irregularities in both Portugal and Brazil.

In October 2005, its Avenida de Liberdade headquarters in Lisbon were swooped on by tax agents and police in Operation Hurricane when the bank’s private banking department clients were under investigation for suspected money laundering and tax evasion.

In the spring of 2005, BES also saw its name linked with the notorious Mensalão scandal in Brazil. The president of BES Group’s Brazilian Bank had held meetings with Marcos Valério, a Brazilian businessman who helped the treasurer of the Brazilian Workers Party (PT) distribute monthly payments to congressmen in allied parties to support the Lula da Silva government in the Brazilian Congress.

The meeting created the suspicion that BES had contributed funds to pay off the Brazilian MPs although the bank always protested its innocence to any involvement, which was never proved.Police officers also raided the headquarters of BCP, BPN and Finibanco and, according to preliminary findings these banks were not guilty of any illicit criminal activity.

The question the Bank of Portugal will want to know is how far banks, such as BES, have a responsibility to find out if their clients’ funds are honestly earned and declared.

BES in Lisbon guaranteed on Friday that its banks in Spain were operating normally while João Salgueiro, president of the Portuguese Banking Association said: “This kind of investigation happens in all countries and this particular operation reveals that the Spanish authorities are particularly hot on this kind of crime.”